ShipRecycling Pages:

07 January 2016

Slashing Capacity the Only Way to Achieve Stability for Box, Dry Bulk Markets: Moore Stephens

While acknowledging the good performance of the tanker markets in 2015,
Moore Stephens believes slashing capacity is the only way to achieve stability
in the dry bulk and container ship sectors.

Richard Grenier, partner and maritime specialist for the international
shipping consultant, writes that although most people blamed the record
December drop in the Baltic Dry Index on China's reduced consumption levels,
"Nevertheless, the dry bulk sector will probably have to reduce the
newbuilding orderbook and increase ship recycling in 2016 in order to restore
the balance."

Since then, the Baltic Dry Index fell to a fresh all time low of 468
468 on January 6.

The partner goes on to note, "The same is true of the container
ship sector, where reducing capacity is seen as the best way to drive up
rates"; he predicts that 2016 will see a cap on new builds and more calls
for ship recycling.

He adds that CMA CGM's recent move to buy NOL "is an indication of
further consolidation; it would be no surprise to see more still in 2016."

Looking ahead further, Grenier says shipping overall will remain
volatile and uncertain; he predicts an escalation in operating and regulation
compliance costs as well as an increased interest in refinancing as a way to
generate cash.

These factors combined compel him to conclude that now is a good time
for investors, "if you have access to finance and a credible business
plan, preferably one with the badge of green approval."

Moore Stephens in November predicted that vessel operating costs as
well as hull and machinery insurance will rise by 3.1 percent and 1.9 percent
in 2016 respectively.